What are the biggest challenges in making the funding settlement work? This was the question tackled by our expert panel in a recent roundtable debate. Report by Alison Moore

In association with

Capsticks

Capsticks

No one working in the NHS can fail to be aware that it is in a financial crisis, with the provider side overspending last year and the settlement for the next few years looking increasingly tight.

This roundtable, the second in HSJ’s top chief executives series brought together leaders from the acute and mental health sectors with experts – including NHS Improvement chief executive Jim Mackey – to talk about whether the proposed funding was going to be enough.

The discussion was held on the day of the EU referendum and shortly before NHS Improvement announced it was looking for £300m in extra savings from the provider sector.

Roundtable Participants

  • Crispin Dowler HSJ bureau chief and event chair
  • Jim Mackey Chief executive, NHS Improvement
  • Anita Charlesworth Chief economist, Health Foundation
  • Tracey Batten Chief executive, Imperial College Healthcare Trust
  • Fiona Edwards Chief executive, Surrey and Borders Partnership Foundation Trust
  • Stephen Graves Chief executive, Peterborough and Stamford Hospitals Foundation Trust
  • Paul Jenkins Chief executive, Tavistock and Portman Foundation Trust  
  • Maria Kane Chief executive, Barnet, Enfield and Haringey Mental Health Trust
  • Sharon Lamb Partner, Capsticks

Chairing the debate, HSJ bureau chief Crispin Dowler suggested it was difficult to disentangle the financial challenge the NHS faced this year from questions about the comprehensive spending review settlement for the NHS and the next three to four years.

“Financially this year is proving to be much harder than was hoped for in the immediate aftermath of the comprehensive spending review,” he said.  Negotiations over contracts and control totals for organisations had taken longer than hoped, he added.

“We are hearing increasing complaints from provider organisations about feeling pressured into agreeing things that they feel are unsustainable.”

Struggle to manage

However, he pointed out that 2016-17 was meant to be the “good year” with a far more generous increase in the NHS budget than in other years covered by the CSR. What were the prospects for this year and what did this mean about the prospects for the rest of the Parliament, he asked.

“Do you believe that the NHS can operate within its current financial settlement over the coming four years without a significant deterioration in performance, or care quality and safety?”

Many of those round the table felt there was a chance that the NHS would struggle to manage on the money proposed but it might be possible – though they were keen to point out it might need action from other areas, such as social care, to maximise the chances of success.  

Paul Jenkins, chief executive of the Tavistock and Portman Foundation Trust, said his gut instinct was that it was going to be incredibly difficult. NHS England chief executive Simon Stevens had said that the £8bn extra funding was the bottom of the spectrum of what was doable and was dependent on the right level of social care funding.

As the chief executive of a mental health provider, Mr Jenkins was very aware of the impact on health of cuts to social care.

We are hearing complaints from provider organisations about feeling pressured into agreeing things they feel are unsustainable

The thing which would give him confidence was getting a handle on demand for secondary care and allowing work on alternative pathways out of hospital to gain traction.

Tracey Batten, chief executive of Imperial College Healthcare Trust, agreed that finances would be “incredibly difficult” but there were “enormous opportunities” around improving efficiency of the NHS.

The NHS achieved incredibly well but there was still room for improvements within the system. “We know that within the secondary care system about 30 per cent of our patients don’t need to be sitting in an acute bed,” she said.

All parts of the system needed to work together if the money was to be enough for a sustainable solution but some of the necessary changes might be structural. “There is a bit of a reluctance around structural change at the moment,” she said.

Will and capacity

Leaders’ roles in this were helping to shift the system in the right direction, said Fiona Edwards, chief executive of the Surrey and Borders Partnership Foundation Trust.

“It has to be a radical shift and a radical mindset shift for all of health and social care and the wider public service sector,” she said. Her own organisation was only two thirds of the size it was a few years ago, through working with different partners.

“My vision is if we can make that shift and help all our colleagues in the system understand that the quality delivery task is within available resources… then we can do it,” she said. But there was a question of whether there was the will and the capacity in the system to envisage working in a radically different way.

Chief executive of NHS Improvement Jim Mackey said that his instinct was that the money was enough. “We, as a management and leadership community, need to stop focusing on the things that we can’t do and focus more on the things that we can do,” he said.

There was a need to be optimistic, get as much as possible out of the existing money and if they then got to a point where it was not enough, that was the point to have an argument about it.

As chief executive of Peterborough and Stamford Hospitals Foundation Trust, Stephen Graves is used to working in a financially challenged health economy.

“As leaders we have to start off from yes,” he said. “There are some things that are absolutely in our individual organisation’s control – our variants.”

People in the services are as frustrated by poor productivity – patients are as frustrated – as the Treasury is. There’s an opportunity for a win-win

There were opportunities with the workforce which had not yet been cracked, he said. However, this work by itself would not be enough.

“The biggest challenge is how we work with others to stop people coming into secondary care,” he said. “We can’t do that by working as an island. We have been driven to achieve things as standalone organisation and to be judged by that.”

Leaders were used to seeing themselves as the accountable officers for particular organisations and being both that and something wider was a mindset change. “You have to give something to gain something,” he said. “The other question is whether can do it at pace – whether we can get there quickly enough.”

He said there were good working relationships in the area. “Most of us found the sustainability and transformation plans process tough but okay,” he said, whereas in other parts of the country people had been “bunged together” and may have found it more challenging.  “A control total for us has been quite helpful. We can say to people this is what we have to deliver this and this is the reason why.”

Anita Charlesworth, chief economist for the Health Foundation, said that two thirds of the projected savings needed to come from current organisations improving productivity.

“It is tackling variation on the demand side but mainly by reducing variation on the provider side,” she said. “That’s a profound change in the NHS. We have shown that variation [exists] for years. We know that if we substantially reduce that variation there is a massive prize which would buy us time to do the things we need to do.”

The NHS was not dealing with this efficiency challenge with the same strength as the transformational change, she added. “We get that new models of care are profound but we don’t get that raising our productivity is profound. People in the services are as frustrated by poor productivity – patients are as frustrated – as the Treasury is. There’s an opportunity for a win-win.’

But in improving productivity the workforce would be “make or break” and she said there will be difficulties delivering this when staff teams were not stable.

This needed to be seen as something other than an issue about having lots of agency staff: it was about having teams which worked well together. “I don’t understand how you do that team level change when you don’t know day-by-day who will be on each ward,” she said.

My vision is if we can make that shift and help all our colleagues in the system understand that the quality delivery task is within available resources… then we can do it

As an example, she said if clinicians were being encouraged to reduce the use of “specialling” – where patients are giving enhanced levels of care – they would want to know that the patient was going to a ward with a well-functioning team before they would agree a patient did not need this extra level of care.

And she stressed that the NHS needed to tackle these challenges before it considered asking for extra funding: “If you put your own house in order you get the right to ask for more money with more credibility and a better chance of success.”

Maria Kane, chief executive of Barnet, Enfield and Haringey Mental Health Foundation Trust, said that nothing was impossible but, given this was meant to be the year of plenty, it felt very hard.

However, the development of sustainability and transformation plans was a great opportunity to leapfrog over some of the things they had been doing incrementally.

The key to ensuring they could deliver at the same performance level was around workforce – but they needed to be supported. “Are we as efficient as we can be? No,” she said, citing IT as an area where NHS staff were sometimes let down.

Radical steps

Sharon Lamb, partner at Capsticks, spoke of the need for investment in the costs of the cultural change which needed to be delivered. Sometimes organisations did not want to invest:

“I think there seems to be sometimes an anxiety around these types of conversations about how much has to be invested in the change.”

With three months of the financial year already gone, it was clear by the time of the roundtable that the NHS would need to take some radical steps to reach an acceptable financial position by year end.

Mr Mackey said the provider side was in danger of being around £500m short of what was needed for the NHS to be in balance this year (2016-17). He described some organisations as having “completely exploded” in the second half of the 2015-16 year.

We are doing some work at the moment which our staff are really anxious about because we are showing that how they spend their time does not look like a fair day’s work to us – and exposing that to peers

“There were a number of organisations which completely lost it last year. I have met organisations who grew their pay bill without discussions, without a business plan.”

He added his teams tried to set fair control totals. “We will have got it wrong in some places. But where we have got it wrong where is an engagement and discussion about it. In financial matters, if you plan to standstill you will go backwards,” he said.

There was a need for people to keep on top of it – to look at the second half of the year, even if they had signed off an annual plan – and stretch it.

Mr Mackey said those organisations which had been “exploding” were often those which were not close to their staff. “It is absolutely a close combat sport. You have to be there every day. You have to be wearing people down and convincing them that the impossible is possible.”

Ms Edwards said: “It is really hard to get your staff to change the way they work. It is really easy to run away from that and think about the big structural thing.”

It was hard to tell staff they were not doing a fair day’s work, she added. “We are doing some work at the moment which our staff are really anxious about because we are showing that how they spend their time does not look like a fair day’s work to us – and exposing that to peers. A lot of organisations are nowhere near these conversations with their staff.”

How language was used was really important, said Ms Edwards. “We really have to engage and empathise with the work that our staff are doing at the front line,” she said: it was a “massive ask” for staff to work well with patients and families in often very stressful moments.

Ms Charlesworth said it was being part of a team which often made challenges feel “doable” and there also needed to be support from other parts of the organisation such as IT and HR. If someone had really disengaged it was their colleagues who could change and challenge them.

However, there may be potential savings in other areas. Ms Kane highlighted how much the NHS spends on transactional costs – something which obviously struck a chord with others in the room. Yearly planning rounds and contracting contributed to these high costs.

If you put your own house in order you get the right to ask for more money with more credibility and a better chance of success

Mr Mackey said: “My preference would be to kick off the planning round in September and finish by Christmas,’ he said, adding it would be “perfectly possible” to plan for three years but there was a nervousness around it because of the risk of something going wrong early in the contract.

“I think we should slaughter our transaction costs,” he said. “It is outrageous how much is spent on them. Let’s think of ourselves as a big organisation and in that context, ask would you accept a planning function internally that is this size?”

Reconfiguration is likely to be one of the ideas under consideration by many STPs. Mr Graves pointed out that savings from reconfiguration of services were often not as much as anticipated at the start. The cost of building physical extra capacity often negated much of the savings and reconfiguration was driven by issues around clinical teams and the sustainability of services.

However, growth in secondary care activity was the biggest driver of increased costs and turning that round offered greater savings. The STP in his area was planning to slow but not reverse that.

Articulate the loss

Ms Charlesworth said the question was how to unlock the prize of delivering care in a better way – and that was not clear. There were few examples of replicable models of doing so.

When there had been a move towards care in the community rather than long stay hospitals, there had been concern and opposition. “You can articulate the loss but what you cannot clearly articulate is the gain,” she said. “It’s a really hard sales pitch.”

Vulnerable people were often very scared and relatives frequently had fought “tooth and nail” to get care in place. This made her worried about moving to structural solutions.

We are doing some work at the moment which our staff are really anxious about because we are showing that how they spend their time does not look like a fair day’s work to us – and exposing that to peers

Mr Jenkins pointed out the fundamental change of closing long stay mental health hospitals had taken 20 years. There was a need to give people the opportunity to concentrate on these big changes and also some pump priming money for transformation.

So what are the risks and opportunities in the current year?

A key theme around leadership emerged, with Ms Lamb saying “time and headspace” for leaders was one of the risks. Ms Charlesworth added there was potential to align the short term with the medium term.

“If we can get whole health economy STP plans which feel real and invested in, emotionally as much as financially, and backed up by three year planning, that would be a big step forward.”